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While it's impossible to know for sure which companies Warren Buffett would love, his investments fit a certain pattern that you can apply to your portfolio.

People like to follow Warren Buffett's investments, and for good reason. Berkshire Hathaway's (NYSE:BRK-A)(NYSE:BRK-B) stock portfolio has produced fantastic gains over the years, and it continues to perform well.

But what if you don't want to buy any of Buffett's current stocks? Maybe you think they're too expensive, or don't pay sufficient dividends. By using the same criteria Buffett uses to pick stocks, you can find companies the Oracle of Omaha would love.

What does Warren Buffett look for when picking stocks?Buffett looks for a few things when valuing stocks. First, the companies he invests in must have a solid track record of performance. They must have produced a solid return on equity, or ROE, for a number of years, have a good profit margin, and have an acceptable history of growth. This pretty much rules out new or speculative companies, which are noticeably absent from Berkshire's portfolio.

Another thing Buffett look at is a company's debt -- specifically the lack of debt. Avoiding debt is one reason Buffett's portfolio has performed so well in bad economic conditions, so a company with an "unacceptable" or risky level of debt would likely be excluded from consideration.

Perhaps most importantly, Buffett looks for companies with a "wide moat," or a distinct business advantage that will keep them profitable for years to come. This could mean the company has a unique or superior product, which can be said of Berkshire stocks such as Deere & Co.(NYSE:DE), Coca-Cola (NYSE:KO), and American Express(NYSE:AXP). Or the company could have a way of doing business more efficiently than its competition, like Wal-Mart(NYSE:WMT) or ExxonMobil(NYSE:XOM).

A few examplesIt's tough to definitively say Buffett would love any companies he doesn't already own, because certain criteria like an "acceptable ROE," "good profitability", and "reasonable debt" are open to interpretation. Having said that, here are a few companies that I believe Warren Buffett would love.

Google(NASDAQ:GOOGL)(NASDAQ:GOOG): Google has little long-term debt, and has grown its earnings and revenue by a 26% average annual rate over the past 10 years. Google's "wide moat" is its dominant position in its primary business (Internet search), which sits at about 65% of all search traffic worldwide, with an extremely dominant 85% share of mobile search.

Whole Foods (NASDAQ: WFM): No long-term debt and fantastic revenue growth averaging about 13% per year for the past decade. Also, the company has remained profitable no matter what the economy is doing. Whole Foods' competitive advantage is that it sells superior products for which its customers are willing to pay top dollar.

Dick's Sporting Goods(NYSE:DKS): The sporting goods giant has done a great job of increasing revenue and carries no long-term debt whatsoever. Its size gives it a distinct competitive advantage over smaller sporting goods retailers, and its "store-within-a-store" concept is unique among large sporting goods stores.

Can you find some more?These are just a few examples, and plenty of other stocks could fit into Buffett's investment strategy. And, of course, this discussion is a simplification, as the process Buffett uses before investing billions of dollars is more complex than the one listed here. However, these basic rules still apply.

By finding these types of companies, and using them to build a diverse, low-risk portfolio, you could produce incredible long-term performance without leaving your portfolio susceptible to recessions, market crashes, and other headwinds.

Author

Matt is a Certified Financial Planner based in South Carolina who has been writing for The Motley Fool since 2012. Matt specializes in writing about bank stocks, REITs, and personal finance, but he loves any investment at the right price. Follow me on Twitter to keep up with all of the best financial coverage!
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